Your Business and Industry
Long mortgage terms again popular in current market
These days - different borrowers have different needs - we are not in the mortgage market of the 1970s or 1980s, when each lender offered one rate and there was one 25-year term that you stuck to.
The more information there is available to either would-be purchasers, or existing borrowers, specifically about the importance of advice in this type of market and the wealth of product options using an adviser will provide them with, the better.
For instance, there has to be an acceptance that different borrowers have different circumstances and different needs, and we are not in the mortgage market of the 1970s or indeed 1980s, when each lender effectively offered one product at one rate and there was one 25-year term that you stuck to for your entire mortgage.
On the whole issue of mortgage term, a recent piece of research from UK Finance, suggested that nearly one in five first-time buyers take out a 35-year mortgage. For some on social media this appeared to be too much to take, clear evidence that we were somehow on the precipice of a major market correction as a result, with these borrowers somehow in perilous danger. To be clear, this is the entire term of the mortgage, not the initial rate.
Now, of course, a longer-term means – quite obviously – that the borrower will take longer to pay off the mortgage and the total interest will be considerably more over such a period. However, firstly, you have to accept that this is a first mortgage and the chances of circumstances changing during a home-owning lifetime are very high, plus for many borrowers at present, a longer term is simply a needs-must approach.
For what it’s worth, Foundation offer 40-year terms on all our mortgage products for owner-occupied borrowers, because we’re aware that borrowers may wish to keep monthly payments lower at the start of the mortgage, and by lengthening the term they are able to keep that affordability whilst still retaining the reassurance that they have a repayment plan in place.
Mortgage product costs may be a relatively small part of these overall outgoings and necessities, but they can still add up, which is why we offer fee-assisted deals which come with a free valuation, no application fees and a flat product fee.
Overall, it’s positive that these options exist and that they allow people to get on the housing ladder that might otherwise not be able to. As long as we’re all doing our jobs in terms of advice, recommendations, measuring affordability and ensuring these borrowers are able to meet their monthly payments over the term, there should always be product options and lenders to choose from in this space.
FOR INTERMEDIARIES ONLY
